20051220_1422.pdf

DECISION MEMORANDUM
TO:CO MMISSI 0 NER KJELLAND ER
CO MMISSI 0 NER SMITH
CO MMISSI 0 NER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:DONOVAN E. WALKER
DATE:DECEMBER 15, 2005
SUBJECT:TERRA GRANDE WATER, STIPULATION FOR TRANSFER OF
WATER SYSTEM TO UNITED WATER, CASE NO. TGW-04-
Terra Grande Water Inc. (Terra Grande), United Water Idaho Inc. (United Water),
and the Staff of the Idaho Public Utilities Commission (Staff) have reached agreement regarding
a Stipulation (attached) by which United Water will take over the operation of Terra Grande
water distribution system. Staff has agreed to certain cost recovery and accounting treatment for
the investment by United Water to take over the system, including the installation of individual
meters. The parties request that the Commission adopt and approve the Stipulation by
subsequent Order. Staff recommends that a public comment period be established for the
Stipulation through January 13, 2005.
BACKGROUND
On February 19, 2004, in Case No. UWI-04-, United Water and Terra Grande
filed a joint Application with the Commission for an Order approving the purchase by United
Water of Terra Grande s water system. Originally the agreed upon purchase price for the system
was $47 000. However, on April 2, 2004, Staff filed comments which concluded that after
United Water s acquisition of the system it would have to invest more capital than initially
anticipated and thus the purchase price should be reduced to $0.00. Staff Comments at 6-7 (Case
No. TGW-04-I). Staff also stated that if Terra Grande would not agree to transfer the system
to United Water for no value then it should be brought within the jurisdiction of the Commission.
Id. United Water, in turn, offered an Amendment to the Purchase and Sale Agreement reflecting
a $0.00 price. Reply Comments at 2-3. At that time Terra Grande determined it was not in its
DECISION MEMORANDUM
best interest to proceed with the purchase and sale transaction, therefore the Application was
withdrawn.
On June 8, 2004, the Commission issued Order No. 29512 in Case No. TGW-04-
, issuing Terra Grande a Certificate of Public Convenience and Necessity and opening an
investigation to establish: (1) whether the existing rates for water service charged by Terra
Grande are just and reasonable Idaho Code g 61-301 , and (2) whether Terra Grande furnishes
provides, and maintains service, instrumentalities, equipment and facilities that promote the
safety and health of its patrons, employees and the public and is in all respects adequate
efficient, just and reasonable. Idaho Code g 61-302.
On January 21 and January 24, 2005, the Commission was notified by Terra Grande
and by the Idaho Department of Environmental Quality (DEQ) that the three water supply wells
of Terra Grande were contaminated with Trichloroethylene (TCE), a hazardous chemical, and
thus were unusable.As a result, an emergency interconnection between Terra Grande
distribution system and United Water s supply system was completed. The Commission issued
Order No. 29735 in Case No. TGW-05-1 that approved interim rates for Terra Grande based
upon the interconnection with United Water. Terra Grande was also ordered to develop a
permanent service arrangement plan and submit it to the Commission for approval prior the
establishment of permanent rates.
On August 12, 2005, a Petition signed by approximately 61 Terra Grande customers
was filed with the Commission requesting that it require Terra Grande to install individual water
meters.
Commission Staff, Terra Grande, and United Water subsequently entered into
discussions whereby the parties have agreed that it is in the public interest to enter into the
Stipulation to effectuate the transfer of Terra Grande s water distribution system to United Water
who would take over the operation of the water system, install meters and other necessary and
prudent improvements, and incorporate Terra Grande s customers into its service area.
I Although all parties have reached agreement on the Stipulation, Terra Grande is awaiting documentation from the
Trustee, who previously held title to the Terra Grande System prior to the time when Terra Grande became a public
utility. According to the trust document, once Terra Grande became a regulated public utility, i.e., when its
Certificate of Public Convenience and Necessity was issued, title was to transfer from the trust to Ms. Childs. This
documentation should be forthcoming, and in any event it was deemed prudent to request that a public comment
period commence on the parties' Stipulation.
DECISION MEMORANDUM
STAFF RECOMMENDATION
Staff recommends that the Commission issue a Notice of Stipulation establishing a
public comment period, with written comments due on or before January 13 , 2006, concerning
the Stipulation entered into by Staff, United Water, and Terra Grande. Staff anticipates filing
comments supporting the Commission s approval of the Stipulation.
COMMISSION DECISION
Does the Commission wish to issue a Notice of the Stipulation and establish a public
comment period with comments due by January 13 , 2006?
Does the Commission wish to employ any other procedure(s) to consider the parties
Stipulation?
DONOV AN E. WALKER
M:TGW- W-O4-0 1- dw2- Stipulation
DECISION MEMORANDUM
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE INVESTIGATION
OF TERRA GRANDE WATER AND THE
ISSUANCE OF RELATED CERTIFICATE
OF PUBLIC CONVENIENCE AND NECESSITY NO. 429.
CASE NO. TGW-O4-
STIPULATION
This Stipulation is entered into by and among Terra Grande Water Inc. (Terra Grande),
United Water Idaho Inc. (United Water), and the Staff of the Idaho Public Utilities Commission
(Staff) (collectively referred to as the "Parties
The terms and conditions of this Stipulation are set forth herein. The Parties agree that
this Stipulation represents a fair, just, and reasonable resolution and disposition of the
investigation of Terra Grande, and that this Stipulation is in the public interest. The Parties
therefore recommend that the Idaho Public Utilities Commission (Commission) approve and
adopt this Stipulation by subsequent Commission Order. See, IDAPA 31.01.01.248.
Nothing in this Stipulation, including the recommended accounting and rate-making
treatment, may be used as a precedent in future cases whether involving United Water or any
other utility. Execution of this Stipulation shall not be deemed to constitute an acknowledgment
by any Party of the validity or invalidity of any particular method, theory, or principle of
regulation or cost recovery, and no Party shall be deemed to have agreed that any method
theory, or principle of regulation or cost recovery employed in arriving at this Stipulation is
appropriate for resolving any issues in any other proceeding in the future.
BACKGROUND
On February 19, 2004, in Case No. UWI-04-, United Water and Terra Grande filed
a joint Application with the Commission for an Order approving the purchase by United Water
of water service properties owned by Terra Grande. Originally the agreed upon purchase price
for the system was $47 000.00. However, on April 2 , 2004 Staff filed comments which
concluded that after United Water s acquisition of the system it would have to invest more
capital than initially anticipated and thus the purchase price should be reduced to $0.00. Staff
Comments at 6-7 (Case No. TGW-04-1). Staff also stated that if Terra Grande would not
STIPULATION
agree to transfer the system to United Water for no value then it should be brought within the
jurisdiction of the Commission. Id. United Water, in turn, offered an Amendment to the
Purchase and Sale Agreement reflecting a $0.00 price. Reply Comments at 2-3. At that time
Terra Grande determined it was not in its best interest to proceed with the purchase and sale
transaction, therefore the Application was withdrawn.
On June 8 , 2004, the Commission issued Order No. 29512 in Case No. TGW-04-
issuing Terra Grande a Certificate of Public Convenience and Necessity and opening an
investigation to establish:1) whether the existing rates for water service charged by Terra
Grande are just and reasonable Idaho Code ~ 61-301 , and 2) whether Terra Grande furnishes
provides, and maintains service, instrumentalities, equipment and facilities that promote the
safety and health of its patrons, employees and the public and is in all respects adequate
efficient, just and reasonable. Idaho Code ~ 61-302.
On January 21 and January 24 2005, the Commission was notified by Terra Grande and
by the Idaho Department of Environmental Quality (DEQ) that the three water supply wells of
Terra Grande were contaminated with Trichloroethylene (TCE), a hazardous chemical, and thus
were unusable. As a result, an emergency interconnection between Terra Grande s distribution
system and United Water s supply system was completed. The Commission issued Order No.
29735 in Case No. TGW-05-01 that approved interim rates for Terra Grande based upon the
interconnection with United Water. Terra Grande was also ordered to develop a permanent
service arrangement plan and submit it to the Commission for approval prior the establishment of
permanent rates.
On August 12 , 2005 , a Petition signed by approximately 61 Terra Grande customers was
filed with the Commission requesting that it require Terra Grande to install individual water
meters.
Commission Staff, Terra Grande, and United Water subsequently entered into discussions
whereby the Parties have agreed that it is in the public interest to enter into this Stipulation to
effectuate the transfer of Terra Grande s water distribution system to United Water, who would
upon closing of the transactions contemplated herein (the "Closing ), take over the operation of
the water system, install meters and other necessary and prudent improvements, and incorporate
Terra Grande s customers into its service area.
STIPULATION
STIPULATION
1. CAPITAL INVESTMENT - Commission Staff recommends and agrees that
United Water be allowed to recover any prudently made investments in the Terra Grande system
both the known capital investments outlined in United Water s October 21 2005 letter (attached
as Exhibit A) and the prudently incurred unknown capital investments necessary to provide
service to Terra Grande customers. Staff agrees that these capital investments be allowed in rate
base at 100% value and not be subject to a 13-month average calculation.
ACCOUNTING RE: CAPITAL INVESTMENT - Commission Staff recommends
and agrees that United Water accrue AFUDC on capital expenditures up to the date the plant is
placed in service. After the plant is placed in service, but before the capital investment is
included in rates, United Water will accrue AFUDC and calculate depreciation against the plant.
When the plant is included in rates, United Water will include the original cost of the plant, plus
AFUDC, in rate base at its full amount net of depreciation.
3. AGREEMENT TO CONVEY ASSETS - On the date of Closing (the "Closing
Date ) Terra Grande agrees to execute a bill of sale and assignments conveying to United Water:
a. Domestic Water System.All tangible personal property and only that tangible
personal property used and useful in connection with the operation and maintenance
of Terra Grande s domestic water distribution system including, equipment, valves
pipes, water lines, services, meters, meter boxes, machinery, inventory, surveys
maps, records, and supplies (all hereinafter collectively referred to as the "Domestic
Water System or as the "Tangible Property
).
The Domestic Water
System/Tangible Property includes the items listed on the attached Exhibit B. The
Domestic Water System pipelines are depicted on the illustrative map attached hereto
as Exhibit C. Specifically excluded from the Tangible Property are all wells, pumps
and motor equipment, well structures, associated well facilities, well land, well
easements, and water rights, further described in Exhibit D.
b. Intangible Property.All intangible property used and useful in connection with the
operation and maintenance by Terra Grande of the Domestic Water System including,
permits, easements, rights-of-way, customer lists and records, maintenance records
tariffs and rules and regulations governing the rendering of service, provided
however, Intangible property shall not include any easement for ingress and egress to
Terra Grande s real property described in Exhibit D (the "Real Property
LIABILITIES NOT ASSUMED:United Water shall neither assume nor be
responsible for, nor take any property subject to, any liability or obligation of any kind, known or
unknown, absolute, contingent, or otherwise. Without limiting the foregoing, it is specifically
STIPULATION
agreed that Terra Grande shall have sole responsibility for all claims, losses, liabilities
obligations, and damages, whenever arising, which arise from Terra Grande s act, failure to act
or arising out of Terra Grande s operation of the Domestic Water System prior to the Closing
Date.
Without limiting the foregoing, United Water shall not assume:
a. Any liability or obligation resulting from violations of any applicable laws or
regulations by Terra Grande prior to the Closing Date;
b. Any employee liabilities of Terra Grande, if any, relating to present and past
employees of Terra Grande with respect to plans, programs, policies, commitments
and other benefit entitlements established or existing on or prior to the Closing Date
(whether or not such liabilities are accrued or payable on the Closing Date, and
whether or not such liabilities are contingent in nature); and
c. Any liability or obligation, including, without limitation, for any personal injury or
property damage or harm to the environment, resulting from the presence or release
of hazardous substances at or from the Real Property prior to the Closing Date or any
disposal of hazardous waste within the Terra Grande service territory prior to the
Closing Date.
CONDITIONS PRECEDENT TO CLOSING - Terra Grande and United Water
agree that consummation of the transaction contemplated by this Agreement is also subject to the
issuance of an order from the Commission that:
a. Confirms that United Water will be permitted in future rate proceedings to earn upon
the total acquisition costs as herein set forth;
b. Authorizes the issuance of an amendment to United Water certificate of
convenience and necessity by the Commission indicating approval of the transaction
contemplated hereby;
c. Confirms the right of United Water to provide service to the area being serviced by
Terra Grande as of the date hereof; and
d. Confirms the right of United Water to provide service at rates set forth in its tariffs.
If there is any portion of such ruling by the Commission that, in either United Water or
Terra Grande discretion, is substantially inconsistent with this Stipulation the parties, or a party,
may, within five (5) business days after receipt of such Commission ruling, provide the other
party with written notice that this Agreement is null and void, and the parties shall have no
further obligations or liabilities hereunder. If neither party provides such notice in the time
STIPULATION
permitted, the parties agree to amend this Stipulation within thirty (30) days of both parties
receipt of such ruling by the Commission, to the effect that this Agreement shall be made
consistent with the Commission s ruling.
It is understood and agreed by the parties that an appropriate due diligence period
consisting of 30 days immediately following the execution of this Stipulation will be established
to allow United Water and Terra Grande the opportunity to further investigate all issues
regarding the acquisition of the Terra Grande s Domestic Water System. Terra Grande agrees to
make available to United Water its repair contractor to assist in inspection of the distribution
system and consultation with respect thereto. The parties agree to cooperate and make all
appropriate documents available in pursuing the due diligence.
CLOSING RELATED MATTERS; POST-CLOSING - Terra Grande and United
Water agree to the following:
a. Closing Date; Time of the Essence.The closing shall take place no later than thirty
(30) days after receipt of the regulatory approvals set forth above provided, however
that if the thirtieth (30th) day not be a business day, then the Closing Date shall be the
next Tuesday after the thirtieth (30th) day.
b. Closing.The closing of the transaction contemplated herein shall take place at the
office of McDevitt & Miller LLP, 420 West Bannock, Boise, Idaho or such other
place as may be agreed upon by the parties.
Possession.Possession of the Tangible Property and the Intangible Property shall be
delivered to United Water on the Closing Date.
d. Billing.Upon the closing date, or as soon immediately prior thereto as possible
Terra Grande shall render bills to its customers for water service provided from the
time of the last most previous billing date up to but not including the closing date.
Terra Grande shall be entitled to receive the revenue and accounts receivable
resulting therefrom. Thereafter, United Water shall render bills for water service
provided on and after closing date and shall be entitled to receive the revenue
resulting therefrom. In the event United Water receives payment for any bill
rendered by Terra Grande which was for service prior to the Closing Date United
Water shall remit said payment to Terra Grande.
CLOSING DOCUMENTS - On the Closing Date, Terra Grande shall deliver the
following documents:
a. Bill of Sale executed by the Terra Grande with full warranties of title conveying
the Tangible Property to United Water;
STIPULATION
b. General Assignment executed by Terra Grande transferring the IntangibleProperty to United Water;
c. Originals, if available, of all certificates, licenses, permits, authorizations, andapprovals required by law, and issued by all governmental authorities havingjurisdiction; and
d. Such other documents as the parties determine are reasonably necessary in order
to effectuate any provision in this Stipulation.
8. PRORATIONS AND ADJUSTMENTS - The following items shall be prorated
and adjusted as of the Closing Date:
a. All accounts payable and other obligations incurred by Terra Grande prior to the
Closing Date shall be caused to be paid or performed by Terra Grande on or
before the Closing Date or as soon as possible thereafter, and United Water
assumes no obligations or responsibility for the payment or performance thereof.
Bills received after Closing which relate to expenses incurred or serviceperformed allocable to the period prior to the Closing Date shall be paid by Terra
Grande; and
b. Such other items as are customarily prorated in transactions of the type
contemplated in this Agreement.
All such prorations shall be based on the most recent ascertainable bills, and be made on the
basis of the actual number of days and the year and month which shall be elapsed as of the
Closing, and to the extent reasonably practicable such prorations shall be made at Closing. Such
items of income and expenses for the period prior to the Closing date will be for the account of
Terra Grande and such items of income and expense for the period on and after the Closing Date
will be for the account of United Water, all as determined by the accrual method of accounting.
INDEMNIFICATION AND DEFENSE OF CLAIMS - Terra Grande will
indemnify, defend and hold United Water harmless against and in respect of:
a. All liabilities or obligations of, or claims against Terra Grande not assumed by United
Water pursuant to this Agreement;
b. Any damage or deficiency resulting from any breach of warranty; and
STIPULATION
c. All actions, suits, proceedings, demands, assessments, judgments, reasonable courtcosts and attorney fees and expenses incident or incurred by United Water in
connection with any of the foregoing.
The indemnification obligations in this section shall expire three (3) years after the Closing Date.
10.PROPERTY RETAINED BY TERRA GRANDE - Terra Grande and United
Water understand and agree that Terra Grande is retaining all wells, well lots, associated
pumping and well equipment and any water rights or permits associated therewith. When Terra
Grande s abandons the wells, it shall do so at its sole cost and expense, and shall cause the wells
to be properly sealed and abandoned, or otherwise disposed of, controlled, and/or maintained in
accordance with methods approved by, and at the direction of the Idaho Department of Water
Resources and Idaho Department of Environmental Quality.
11.REPRESENT A TIONS.- Terra Grande warrants that its has good and sufficient
title to the Tangible Property and the Intangible Property which are being transferred hereunder
free and clear of all liens, claims and encumbrances. Terra Grande further represents and
warrants that it has secured all necessary consents and authorizations for the conveyance of the
Tangible Property and Intangible property required by that certain Trust Agreement dated
November 4, 1959 by and between Real Estate Sales Corporation and First Security Bank of
Idaho, NA and subsequently assigned to Terra Grande and Wells Fargo Bank NA.
. TERRA GRANDE MAKES NO REPRESENTATION OR WARRANTY WITH
RESPECT TO MERCHANTABILITY OR FITNESS FOR ANY P ARTICULAR PURPOSE
AND ANY SUCH OTHER REPRESENTATIONS OR WARRANTIES ARE HEREBY
EXPRESSLY DISCLAIMED. UNITED WATER HEREBY ACKNOWLEDGES AND
AGREES THAT IT IS RECEIVING THE TANGIBLE PROPERTY AND INTANGIBLE
PROPERTY ON AN "AS-, WHERE-IS" BASIS
STIPULATION
DATED this llL day of December 2005.
RANDY LOB
Utility Division Administrator
Idaho Public Utilities Commission
GREGORYP. WYATT
Vice President
United Water Idaho, Inc.
BARBARA V. CHILD
President
Terra Grande Water, Inc.
STIPULATION
~.
1:
DONOVAN E. WALKER
Deputy Attorney General
Idaho Public Utilities Commission
(\
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:tg~
t~-------
DEAN 1. MILLER
McDevitt & Miller, LLP
Counsel for United Water Idaho, Inc.
JOHN R. HAMMOND
Batt & Fisher, LLP
Counsel for Terra Grande Water, Inc.
DATED this day of December 2005.
RANDY LOBB
Utility Division Administrator
Idaho Public Utilities Commission
BARBARA V. CHILD
President
Terra Grande Water, Inc.
STIPULATION
DONOV AN E. WALKER
Deputy Attorney General
Idaho Public Utilities Commission
DEAN J. MILLER
McDevitt & Miller, LLP
Counsel for United Water Idaho, Inc.
JOHN R. HAMMOND
Batt & Fisher, LLP
Counsel for Terra Grande Water, Inc.
UnitedWater
(8)
United Water Idaho
8248 West Victory Road
O. Box 190420
Boise, Idaho 83719-0420
telephone [phone]facsimile 208-362-7069,
October 21. 2005
Mr. Randy Lobb, Utilities Division Administrator
Idaho Public Utilities Commission
472 West Washington
Boise, Idaho 83720-0074
McDEVITT
&.
MillER. lLP
I: r '( ~ r -.
Re: Terra Grande RECEIVED
Dear Randy:
At our meeting on October 6, 2005 , we discussed various issues regarding United Water Idaho
acquiring the Terra Grande water system; and you also asked me to submit United Water
proposal for doing so. The following information responds to your request.
Known Capital Investments Required
United Water Idaho believes the following capital investments are required to provide safe and
adequate service to the Terra Grande system. Additionally, certain main replacement projects
have been included in this proposal based on our knowledge of the system gained during our
previously unsuccessful attempt to acquire the system. A map and a summary of the capital
additions are enclosed with this submission.
System Inter-ties
In order to provide adequate water flow and pressure for fire protection, the existing 4-inch
inter-tie installed early this year will be abandoned and replaced with an 8-inch line
connecting the United Water system on South Entertainment Way with the Terra Grande
system on South Ash Park. An additional 8-inch inter-tie and a fire hydrant will be installed at
the southern end of the system from United Water s main in Targee to Terra Grande s main in
Skillern Drive in order to maintain a two-way feed into the system and to provide some fire
protection in the southern portion of the system.
Metering
The Terra Grande system is currently un-metered and customers are billed according to a flat-
rate tariff. In order to meter the entire system, United Water proposes to install meter risers
and meters in the approximately 59 services that currently have adequate meter boxes (but no
meters), and to install cc.'IT'..~~tt~ m~t~r bcx;::; ~"ld meters in the remaining servi(,;~: -
,;.,
ith no
existing meter box.
www.unitedwater.com
Exhibit A
Page 1 of 5
..s '-'" e z.
Abandon Main Lines and Install Customer Services
There are several locations where existing Terra Grande main lines run along the back and
side property lines of lots. These lines should all be abandoned and new customer service
lines installed from the street to the home, including meter boxes and meters.
The lines to be abandon are:
The 4-inch lines in the area north of Dorian, between Penninger and Ash Park.
The 2-inch and 4-inch lines south of Dorian, between Penninger and Ash Park.
The 2-inch line north of Lemhi, between Penninger and South Ash Park
Completely new customer service lines, meter boxes, and meters will need to be installed from
the street to the home, including the customer side service, for the seven (7) lots previously
served by the abandoned main lines.
Main Line Replacements
Based on our previous due diligence on this system and from knowledge gained during sewer
installation work in the area, United Water is aware that the water lines in the north end of the
Terra Grande system are of poor quality and should be replaced now.
The following main line improvements are required:
130 feet of 8-inch and 280 feet of 4-inch water main installed from the Ash Park
inter-tie north on Ash Park and a blow~offto replace the existing 3-inch line.
425 feet of 8-inch water main installed in Dorian from Ash Park to Penninger
replacing the 260 feet of2-inch main in Dorian.
575 feet of 4-inch water main installed in Penninger, north from Dorian, and a
blow-off to replace the existing 3-inch line.
235 feet of8-inch water main and a blow-off installed in Penninger, south from
Dorian to 1717 Penninger, and reconnect with existing main line, replacing
existing 3-inch main in Penninger.
185 feet of 2-inch water main and blow-offs installed in Penninger Court to replace
existing 2-inch and 1-1/2-inch main line.
Installation of one fire hydrant located at 8023 Dorian.
Replace blow-off at south end of Ash Park due to unusable condition of existing
blow-off.
Remove main line T's at wells No.3 and 4 and replace with main line.
Unknown Capital Investments Required
There are three basic areas where capital investments will likely have to be made as the above-
described work is performed. However, the quantity and cost of such work is currently
unknown. First, as risers and meters are installed in the e~isting meter boxes, we may find
that some of the existing boxes are unusable and must be adjusted and/or replaced. Second, as
meter boxes are installed in services where no box previously existed, we may find that the
Exhibit A
Page 2 of 5
service line (either customer side or company side, or both) is in such poor condition that it
must be replaced to maintain service to the customer. Third, as replacement services are
installed, we may find that the existing main to which the service must be connected is in such
poor condition that one or more sections of the main must be replaced.
As of this writing, we cannot speculate on the quantity or cost of these kinds of investments
but we believe that they will occur at some level simply due to the age and condition of other
portions of the system.
Acquisition and Construction Timing
We have not had contact with Mrs. Barbara Child since mid-2004, when the initial acquisition
attempt was foiled and the docket on Case No.UWI-04-02 was closed. During our
acquisition attempt, we performed due diligence with regard to obtaining clear title to the
water system assets and believed that it was possible. We would need to follow up at this time
to ensure that rights and title to the system assets have not changed. I estimate that this
investigation would take about two to three weeks. Assuming cooperation from all parties, a
closing on the acquisition is conceivable 30-45 days following Commission approval.
Construction of the above-mentioned investments would be possible only after a closing and
transfer of the assets was finalized. Depending on the timing of the acquisition, and
considering winter weather, we currently estimate a construction time of approximately three
months for the above-mentioned known investments. The quantity, if any, of unknown
investments, as mentioned above, could lengthen the time to complete the entire project. In
any event we would like to see all initial construction completed by May 31 , 2006.
Customer Billing and Conversion to Metered Rates
Upon closing the acquisition United Water would read the current master meter serving the
entire Terra Grande system and render a final bill to Mrs. Child. At the same time, we
propose to initiate service with each individual Terra Grande customers on a flat-rate basis in
accordance with United Water s current Tariff Schedule No 1B, Flat Rate Service. Each
customer would receive service on the flat rate tariff until their meter was installed, at which
time they would be converted to service in accordance with Tariff Schedule 1 , General
Metered Service. This is identical to the approach used when we converted the Barber system
from flat rate to metered service.
United Water s Return on Investment
In order to adequately compensate United Water for the investments it will need to make after
acquiring the Terra Grande system, I propose that United Water be allowed to calculate and
record on its books AFUDC, as determined in the most recent rate case, on all of t.~e above-
described investments that it prudently makes in the Terra Grande system, until such time as
those investments are allowed to be recovered in its next rate case. I also propose that those
Exhibit A
Page 3 of 5
investments be allowed in rate base at 100% value and not be subject to a 13-month average
calculation.
Currently United Water is billing Mrs. Child for all water used in the Terra Grande system via
the metered service interconnection installed January 28 2005. Water revenues billed from
1/28/05 through the last meter reading on 9/20/05 amount to $36 973. Based on the existing
history, I estimate a full year s revenue, adjusted for the current rate increase, to be
approximately $47 000. United Water believes that these revenues are included in the revenue
requirement calculated in the most recent rate case since they represent part of the growth
revenue United Water provided as offset for the Columbia Plant.
After acquisition, it is certain that United Water will earn less revenue and less operating
income from the Terra Grande customers via individual meters than from the current master
metering arrangement. This is true because customers will be able to monitor their usage
through bi-monthly billings and adjust their use accordingly, the overall system leakage will
no longer be billed, and United Water will incur additional system operating, billing, and
collections costs. Assuming that the Terra Grande customers provide a revenue stream at 80%
of the average residential rate, due to smaller homes and yards , the annual revenue would be
approximately $32 600 (116 customers ~ $351 per year X 80%). Thus, United Water will
suffer at least a $14,400 revenue deficiency even before any return on investment is
considered.
Miscellaneous
United Water understands that Mrs. Child wishes to maintain ownership of all Terra Grande
land, wells , pumping equipment, and water rights. United Water anticipates only taking
ownership ofthe distribution system assets and all (if any) easements and rights-of-way
required to operate and maintain those assets. It is United Water s strong belief that all
existing Terra Grande wells should be properly abandoned and capped in accordance with
Idaho Department of Environmental Quality requirements. United Water desires that the
Commission instructs Mrs. Child to perform such abandonment, and it desires to be held
harmless from any and all claims or liabilities arising as a result of any contamination from the
said wells.
If you have any questions or need additional information, please contact me at 208-362-7327.
--"""'-""
cc:J. Miller, McDevitt & Miller
P. Foss, M. Gennari, J.Healy, S. Rhead
Exhibit A
Pal!e 4 of 5
Revised 10/20/05
United Water Idaho Estimated Investments in Terra Grande
Interties -
Dorian & Ash ParK
Targee & Skillern (plus one fire hydrant)
Abandon 4" Service, Meter and Backflow Vaults
Main Replacements & Abandonments
Replace 410' of 3" PVC pipe (Thin wall) on Ash ParK Lane
Replace 260' of 2" Galvanized pipe on Dorian W. of Ash ParK Lane.
Replace 575' of 3" PVC ( Thin wall) on Penninger Dr. N. of Dorian.
Replace 235' of 3" PVC (Thin wall) on Penninger Dr. S. of Dorian. (add:1 fire hydrant)
Replace 185' of 2" and 1 112" PE, class 160 (Thin wall)
Abandon lines in back yards along property lines
The 3" PVC is Brittle and the 2" & 1 1/2" PE is thin wall with hose clamp fittings.
Replace Blow off
Replace existing blow off - Ash ParK & Lemhi (flushing)
Service Lines Due to Main Line Abandonments
Install 7 service lines from the main to the house.
Meter Boxes
Install 50 Meter Boxes & Setters in existing service lines
Meter Relocators
Install 59 Relocators in existing meter boxes
Abandon Well T's
Well #3 & #4
Subtotal
Company Construction Overheads ~ 7.53%
Subtotal
Omissions and Contingencies ~ 5%
Project Total
Materials &Company Total
feet size Contractor Labor Cost
160 921 $400 $10,321
684 $3,352 036
$300 $2,793 093
130 $94 491 $3,600 $98 091
280 included above included above
425
575
235
$350 117 467
503 $27 934 $34,437
$10,515 $39,107 $49.622
742 $2.867 $5,609
$858 $3,352 210
$131 364 $84 522 $215 886
$16.256
$232.142
11.607
$243,749
Exhibit A
Page 5 of 5
Exhibit B
Tangible Personal Property
The entire Terra Grande Water distribution system, excluding those items on Exhibit D.
The Tangible Personal Property transferred to United Water Idaho, Inc., includes all
water mains, services, meter boxes, meters, valves, valve boxes, and all other water
distribution system appurtenances including:
Approximately 1 750 feet of2-inch GIP water line
Approximately 1 585 feet of 3-inch AC water line
Approximately 390 feet of3-inch PVC water line
Approximately 4 858 feet of 4-inch water line
Approximately 53 single and 26 double service lines
Exhibit C
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TERRA GRANDE
TERRA GRANDE
BOUNDARY
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Exhibit D
Excluded Property
All real roperty upon which Terra Grande Water, lnc.'s wells are located.
The following personal property and appurtances:
Well, well casing and appurtenances, well building, all pumps, motors, valves
meters, piping, electrical and control equipment and appurtenances and easements for
ingress and egress into the following listed Terra Grande Water wells:
Well No.located at 1719 Ash Park
Well No.located at 1607 Ash Park
Well No.located at 1735 Penninger
Well No.located at 8111 Lemhi
Water Rights
Water Right No. 63-18443